Examination of Witnesses (Questions 40-59)|
1 APRIL 2008
Q40 Dr Naysmith: It is fairly easy
to find out whether that is true or not.
Mr Ehmann: It is. One of the things
that you mentioned, and certainly we will have heard from business
owners, is something that is slightly different, which is about
whether other European nations are fulfilling their obligations.
I think that is a wider problem and a more difficult problem to
measure, but if there are widespread examples of gold-plating
in its true sense that is quite a serious issue which needs investigation.
Q41 Dr Naysmith: I am supposed to
ask questions about the scrutiny of regulation. As you know, lots
of bodies have worked with regulation scrutiny in the UKthe
Better Regulation Executive, the Risk and Regulatory Advisory
Council, the Cabinet-level Panel for Regulatory Accountability,
as well as this Committee, and I suppose the Public Accounts Committee
has been poking its nose in recently as well. Do we have the right
structure for scrutinising regulation in the UK in the light of
all these different bodies?
Mr Ehmann: I will start with a
very short one, if I may. We absolutely welcome the amount of
scrutiny that is going on. Accepting that there may be best realms
for certain types of scrutiny and better realms for others, it
is excellent to see that there is so much interest and energy
invested in scrutinising this agenda, so I would not discourage
that in any sense. I think clarity about which elements are being
looked at is critical though.
Q42 Dr Naysmith: Was it a good idea
to transfer the BRE from the Cabinet Office to BERR? Was that
a good move?
Mr Ehmann: I cannot see that its
move has affected its ability to do its job in the short term.
There was a potential question about whether a department, seen
in a different light from that of the Cabinet Office, would be
able to extend across government in the way that was desired,
but I think the jury is still out on that and we have not seen
any problems to date.
Q43 Dr Naysmith: Was there any evidence
of that happening before in a meaningful way that is not happening
Mr Davenport: There was some evidence
of friction between BERR and the BRE and it was starting to become
confrontational, and I think it was a good move that they moved
them together because they are working to the same end at the
end of the day. Albeit that one is scrutinising the other, they
are still working to the same common end and I think they have
kissed and made up now. Things are a little better.
Q44 Dr Naysmith: Have you anything
to add, Mr Fell?
Mr Fell: On the scrutiny point,
I would endorse what Alexander has said about the need for greater
clarity in that. As we have had a number of changes in some of
the bodies as we have gone from a Better Regulation Task Force
to a Better Regulation Commission and a Risk and Regulatory Advisory
Council, I think there is a perception there that the scrutiny
involved in that has diluted slightly, so I think there is a big
onus on the Better Regulation Executive to play a big scrutiny
role, and I think there is a need for transparency about that
scrutiny to add to confidence in the process and that will help
to tackle some of the perception issues we have been talking about
this morning. That would be my take on where the scrutiny role
sits at the moment.
Ms Low: I would broadly agree
that I do not think we have any appetite for any different structures
from what we have at the moment. We have not noticed anything
appreciably different or falling off in the way of the BRE's effectiveness
since they went into BERR, but I think there is still a very important
point to make about the lack of measurable benefits from the structure,
but that is not to say that merging all of those structures into
one is going to produce different benefits. It is about ensuring
that BRE is operating effectively within the heart of Government
and is providing that very robust scrutiny role.
Q45 Dr Naysmith: I am sure you have
mentioned earlier this morning the health and safety and employment
regulation and the Government and BRE are looking at both of these
areas. Do you have any specific suggestions on how to improve
those areas without lowering standards? I suppose we had better
remember that health and safety is probably the most misunderstood
and the most unpopular body that is responsible for regulation.
Mr Davenport: From the FSB's point
of view, we did a survey on that and found that 72% of businesses
found health and safety administrative requirements more bureaucratic,
and some of the bureaucracy that is in that legislation can be
slightly farcical when you are talking about businesses of one
or two people, things like fire doors, where you have signs over
fire doors and it is the only door in the building so it is difficult
to get out anywhere else, silly things like that.
Q46 Dr Naysmith: But was it not also
found that when things were properly explained in clear English
people understood and accepted it?
Mr Davenport: Absolutely.
Q47 Dr Naysmith: And the amount of
time they had to spend on it vanished?
Mr Davenport: Yes, and also the
Health and Safety Executive come round a lot more. Funnily enough,
in my business we had a survey only recently and they were saying
to me that on the estate that we are on, which is something like
40 separate companies, there were only two question marks on the
entire estate, and they say that small businesses tend to be much
more on board because the business owner is living and working
in the building so he does not want to injure himself, so he is
going to get the Act correct. Mainly health and safety is common
sense and it tends to be larger organisationsI have a colleague
who is in the construction industrywhere things become
a problem because building things is a risky business, and that
is where the legislation needed to be concentrated more than on
electronics businesses or, in my case, high precision engineering
Q48 Dr Naysmith: So you agree with
me that explaining things better and making the regulations clear
makes a big difference? We do not want to lower standards in lots
of areas, and certainly in the building industry standards have
improved immensely in the last 10 years or so.
Mr Davenport: We mentioned this
before. It is communication which is what we are talking about.
There used to be a resistance to talking to the official that
comes through the door, but they are beginning to have some training,
although I think that could be improved, and if they are not seen
to be enemies but are seen to be assisting then a lot of those
comments will disappear.
Q49 Dr Naysmith: Mr Fell, do you
have anything to add?
Mr Fell: I would agree with exactly
your starting point. Quite clearly at the end of the day business
has got very much the same interests here, as Clive said. Everyone
wants fit and healthy people at work. That has got to be the starting
point. I think where the frustration comes in is how you go about
that. HSE, in their simplification plans, I think, have already
delivered something like a 50% reduction in the form-filling aspects
of what they do and I think that will help to tackle a lot of
frustrations there. The other bit about it is getting the touch
points right, so on the inspection and enforcement regimes, if
we can get right a lot of some of these ideas around data sharing
so that they are not providing the same bit of information several
times over or to different agencies or bodies, I think that will
be a real help in getting a more positive level of engagement
with this agenda. Perhaps some of the work that is going on in
the retail enforcement pilot approach could be a useful model
Q50 Dr Naysmith: How about employment
regulations as well as health and safety regulations? Some of
the employment regulations are unpopular because they inevitably
increase costs as part of the regulation.
Mr Fell: I think that is right,
but again you can help tackle some of the frustration aspects
of employment legislation. With the national minimum wage, for
example, when it was introduced, I think a number of sectors from
the outset (and it remains the case today) found it difficult
to pay that absolute amount but it has been introduced at a very
pragmatic level and certainly is quite simple to operate as a
process. Contrast that with the Working Time Directive, which
I think firms would tell you administratively is, quite frankly,
a bit of a nightmare. We are talking about examples of EU best
practice, definitions of autonomous workers, for example, to whom
the directive should apply, so I think there are two good contrasts
there in probably the most well known pieces of employment legislation
in recent times in terms of the approach that is taken to them
and the frustration factor that companies have with them, albeit
they might take issue with the cost basis, and if we can tackle
the frustration aspect that would certainly help.
Q51 Judy Mallaber: The CBI in its
report talked about new employment rights adding £37 million
to business costs and the FSB in the piece that they have given
us go into all the different employment rights. Are there any
of those employment rights that either organisation or the other
organisations would want to get rid of, or is it just around administration?
I would prefer you to be up front and say if you are arguing to
take any of those rights off the statute book.
Ms Low: For us it would be impossible
to make a case to remove any one piece of regulation. That is
where the cumulative impact of argument comes from because our
business members can very easily see what the underlying policy
aim is of a lot of the employment legislation and what has come
on board. One of the things that I think it is important to bring
out, particularly with employment legislation now, is the fact
that there is a shift and what adds to the frustration which Matthew
was talking about is also when you get businesses who are doing
much of the things that are being advocated and then they see
more legislation coming in on the top of that, so that is back
to the point about flow. We have picked up from survey work about
small and medium sized businesses, with the right to request to
return to work on a part-time basis, for example, substantial
evidence to show that 90% of those surveyed showed that the businesses
are doing that for their employees and so you then get a very
powerful argument against any more employment legislation in that
area. I think that is quite an important policy point to make
when the thinking is coming in around what new to do. Just very
briefly on parliamentary scrutiny, when you look at the fact that
3,000 statutory instruments come through each year, many of them
on very minor things, once again it is a cumulative point, that
buried in there will be a number of very big things which have
a lot of large impacts and stemming that flow is a very important
part of the parliamentary scrutiny process, I would suggest.
Mr Ehmann: If I may add something
else, and it is also tied in with your previous question about
best practice internationally, there is a question, perhaps not
exclusively on employment law, about exemptions which was certainly
raised in the Enterprise White Paper which came out recently,
which is the extent to which we can exempt smaller businesses
from some obligations. I think that is a detailed piece of work
to do because, as has clearly been pointed out, some obligations
legally and socially should be universal, I do not think there
is any doubt about that, but there also is not any doubt that
if you look at small business statistics over the last five or
10 years you will see that there has been good growth in sole
trader set-ups but that has not percolated through to growth of
smaller, medium and larger sized enterprises in this country.
I would argue, on behalf of what I hear from our members at least,
that part of that is linked to a very distinct line about the
regulatory obligations that one takes on when one has that first
employee taken on. I am not necessarily espousing restricting
regulatory requirements for a certain number of employees but
what I would recognise is that the current system does have an
effect on growth of businesses in this country.
Q52 Judy Mallaber: What about the
FSB? Are there areas which you would remove?
Mr Davenport: I absolutely agree
with what Alexander has said. I mentioned earlier that the level
of burden on small businesses is six times larger than it is on
larger businesses because it is one individual doing it and he
has a large amount of paperwork to do, but it is important to
try and encourage small businesses. Their first two years are
when they are at their most frail but there is the next stage
which often tends to be ignored and that is when they want to
expand and they reach a point where they are often overstretched
and lots of businesses which have been running for five or six
years tend to fail because of the fact that they overstretch their
resource or something like that. That is not the time to suddenly
have large administrative burdens placed on them, at the point
where they are just about to go from a very small, comparatively
frail organisation to a more robust organisation, and it is important
that we recognise that. The amount of finance that is available
to start-up businesses is huge in relationship to expansion businesses.
We also have an issue as far as businesses coming to retirement
are concerned. Ninety-seven per cent of small businesses in Britain
have owners over 55. That is a time bomb which is ticking away.
What do we do with those small businesses? Do they just close?
Do we leave them as they are and let them die on the vine? Do
we encourage them to be sold to young entrepreneurs to start again?
That affects what is happening to the burdens that are applied
to those businesses because when someone is assessing a business,
a bank or any finance house is assessing what is the cost that
is going to be incurred on this business if it is purchased by
this individual, that tends to constrain the movement and acquisition
Q53 Judy Mallaber: One of the areas
that you particularly highlight and has been highlighted to me
is around maternity rights. I was interested in whether any of
your organisations in your overarching view of what is good for
your membership have looked at both the skills gap as a constraint
on future encouragement of your membership and its ability to
expand in the economy and the relationship between that and these
various pieces of legislation, given that a huge area where we
are not using people's skills is amongst women. Certainly, as
somebody who has both run a small organisation myself and now
employs a small number of staff, I would do anything to keep my
good trained staff and do things to assist them to remain or come
back into my employment, and that is clearly a constraint on business
and I wondered if you had done any analysis as organisations of
how you reconcile what we need to do to retain and enhance people's
skills and get more people involved in the work with these areas
of what I can understand are quite burdensome to implement for
a small organisation.
Ms Low: The survey work that we
have done shows that businesses are providing all types of flexible
working to retain staff. Business owners that we surveyed said
that they were operating flexible working not just for women with
young children; if they did it they were doing it right across
the board for everyone, because in small businesses you have relationships
with everyone so that is very much how it was framed, but the
first reason they were doing it was out of personal conviction,
and staff retention was a very important part of that too. There
was the belief in the fact that it was the right thing to do but
also the fact that it was the best way of retaining good staff
and having that commitment for the long term, as you say.
Q54 John Hemming: There has been
a debate about the over-judicalisation of government and there
is a question in employment law as to whether we are seeing the
same situation. I have employed people for over 20 years and some
individuals still work for me whom I employed many years ago.
About 15 years ago you would have had a quiet word with somebody
but now you have to initiate a competency procedure. I wonder
if the way in which the rights are enforced and the way the costs
operate, and obviously the FSB have a very helpful service which
I cannot use for my larger business because it is a larger business
but I can with a smaller business --- do you have any comments
on the over-judicalisation of employment law?
Ms Low: Very often, to make things
tidy, it has been a preference, particularly, I have to say, of
large companies with large HR departments, for example, to have
that certainty within the process and then that would require
representatives and procedures. The flexibility and the informal
nature of that has then been lost as it filters down the scale
to smaller businesses employing smaller numbers of people. As
you know, they will not necessarily have HR departments and have
that advice and knowledge of procedures in-house, so I think there
has been an element of that. In flexible working, with extending
the right to request, for example, there is a procedure to be
gone through and if you have never had anybody who has requested
it before and you are not used to that then as a manager you have
to get up to speed with that and employ that process.
Mr Ehmann: I think flexibility
in implementation is critical because no two businesses are the
same in terms of size or the business they practise, so, as has
been said earlier, if you can draw much more of a link with the
common-sense objective of a policy and therefore a business is
able to implement it in a way that suits them best, that will
probably deliver much more of the result that you intend to achieve.
The other thing I would just say is that the Institute of Directors
also offer the advice service to any sized business as well.
John Hemming: I have refused to join
the IoD on a number of occasions.
Chairman: We will move on. Some of this
recent series of questions are not absolutely central to our inquiry
but are of interest to members because it contextualises things.
Mr Ehmann, you talked about the evidence that burdens can affect
growth and I heard Mr Davenport's interesting observations there.
If there is any comparative evidence that you can produce to show
that other people do it better that would be extremely valuable
to us. Can we move back to the BRE?
Q55 Gordon Banks: I suppose what
we have been hearing from you indirectly today is about your experiences
of working with BRE, but directly what are your experiences of
working with the BRE? We have talked about the business focus
and how the move to the Cabinet Office was maybe a good step.
How good has that been, or is the aspect of business still viewed
as a necessary evil to complete the process that the BRE has got
and not really as a partner? Does the BRE have the right people
and is it organised in a way which is helpful to you, or is it
organised in a way which is helpful to the BRE? I suppose you
could go on and say, does it have enough new ideas, does it talk
enough to organisations like yourselves? How can we expand on
some of the issues that we have talked about, how the BRE can
improve its communications processes, because we have been talking
about some of these things over many meetings and it would be
good to think of a focused way in which we could move the communications
Mr Fell: My experience and the
CBI's experience of working with the BRE is that it is quite a
positive working relationship. Quite clearly we engage with any
number of government departments where they have business-based
issues and will continue to do that. I think we would have a level
of dialogue with BRE if we had a particular concern about something
that was coming out that we think they could usefully on work
from the inside to help raise awareness of any concerns or issues.
I think they are quite happy to work with us on a relatively informal
basis to say, "Are you aware of some changes that are coming
out? What are your views on them?". I think that level of
dialogue is pretty good and pretty healthy right across the piste,
so, in terms of a working relationship with the department, that
works quite effectively for us from a business association point
of view. Quite clearly that may be different if you are an individual
firm, for example, and particularly a smaller company. In terms
of those communication channels that we have talked about this
morning I think there is scope to do more on that front, but certainly
from an organisation point of view, from the CBI's perspective,
those channels are working quite well.
Mr Ehmann: If I may add a couple
of points directly to the questions you ask, on the whole the
Better Regulation Executive has been extremely helpful and willing
to assist. I think it is well resourced in the sense of the capacity
it has amongst its staff to engage with us. I think they are very
good on the whole. On the flip side I am not sure they are well
enough resourced to do what they do today, let alone what we would
like to see the agenda achieve and the activities that would be
necessary. If I may add two other slightly more negative points,
there is a lot of listening but the transference of that into
tangible activity sometimes does not take place, and the last
point is that I still feel the relationship is perhaps, speaking
from the Institute of Directors' point of view, a little too much
pull in the sense that the onus is very much on us to go to the
BRE with what we want rather than the BRE coming to us a lot more
Mr Davenport: I would completely
endorse that section of Alexander's comments. It always seems
to be that we go to them, not them coming to us. I think some
of that was when they were in the Cabinet Office more than now.
They are beginning to realise that engagement is the way forward
because it gives them information as well.
Q56 Gordon Banks: They will have
to view you as a partner?
Mr Davenport: Yes.
Q57 Chairman: They did claim to us,
Mr Davenport, that some of their officers have been out in the
field working with some of your members. Has that been a positive
Mr Davenport: It has, yes. I take
note of what Sally said about the Mitchell Leeman experience and
the fact that he has moved on to another department. What I would
say about that is that Mitchell's experience in the field is anecdotal
within BERR. The information is still there. It is still being
used. "I remember when Mitchell was out in the field",
so they are conscious of it. It is no bad thing and I think the
more it happens the better for both organisations it will be,
because it is a positive thing for business as well to understand
how the Civil Service works and how the regulatory system works.
It is always positive for both sides, I feel.
Mr Ehmann: Sometimes I am under
the impression that business organisations are being managed by
the BRE rather than seen as a solution to the problem which they
are looking to solve. I think maybe there is a little change in
view that is necessary.
Ms Low: We would say that the
BRE is key to all this, to delivering regulatory reform. We would
like to see greater political clout at the centre and greater
levers that they can pull across the government departments so
that we are seeing step changes in measurement and rigorous enforcement
of impact assessments, as I have set out. I cannot really think
of any great new ideas that have come out but there certainly
has been partnership working operating effectively; we have very
good dialogue, and also we have seen a lot of the key senior people,
not just the inimitable Mr Leeman but also Jitinder Kohli and
William Sargent were very visible and we have hosted across the
chambers a number of roadshow events which have enabled a number
of our businesses to meet and for them to get in front of businesses.
Also, there have been across BERR a lot of shadow trips to businesses,
which is all good, but I think you have to weigh it against the
vast task that has to be done, so we need to keep that in perspective.
I would say yes, it is a positive relationship and I think there
is good dialogue, which has, I think, warmed up since they moved
Mr Fell: A thought that always
occurs to me is that sometimes they have a bit of a tricky task,
in a sense, in that a lot of their successes might be done behind
closed doors if they have had a quiet word with colleagues in
other departments. Perhaps it is sometimes not the best idea in
the world to go trumpeting your success because the person you
have had that success with might not be so keen to turn to you
for advice next time out if you have then a big public fanfare
about how you put them right on an issue. I think it is worth
recognising that that is the nature of the work that they are
engaged in and sometimes that is the way that they will operate.
Q58 Chairman: HMRC claim to have
made progress in making life easier for business by designing
better forms and simpler returns. Should the BRE work more to
share best practice with HMRC?
Mr Ehmann: Absolutely, but I would
go one stage further. I think the BRE needs to have as much of
a stick as they have with any other department with HMRC, in fact
perhaps more so.
Mr Davenport: That would be a
real culture change as far as HMRC is concerned.
Mr Fell: We would endorse that
view. You only need to look at the classic example of the tax
handbook which has shot up by some 4,000 pages to be the longest
tax code in the world in about the last seven or eight years,
so the message back to HMRC is that all is not entirely well on
Q59 John Hemming: I come back to
the measuring process again. Do you think the figures for savings
stand up, such as the £800 million in savings claimed under
the Departmental Simplification Plans to date?
Mr Ehmann: There is a clear mismatch
between that and the 1% who feel that regulation has improved.
If I might just say, I think the Armageddon scenario in 2010 is
that government departments say they have achieved 25% but business
has noticed no change. In that circumstance I see the political
will that exists on this agenda dissipating, I see businesses'
engagement in the process completely diminished, and potentially
we could have a list of new regulatory burdens that are all mounting
post-2010 too, so no is the ultimate answer.
Mr Fell: For me it would come
back to the point about communicating the changes that have taken
place. Employment legislation has figured quite high on our agenda
today and a lot of the savings which are claimed in, for example,
the BERR Simplification Plan are centred around 20 or 30% take-up
rates on employment guidance. I think that is where a real job
of work needs to be done to make sure that those take-up rates
are secured for the savings to be real.
Ms Low: I support that, and I
also think that the business as usual approach has distorted that